And more importantly, you don't need to upgrade to SP2, just do the following.
Hit 'Start' then 'Run'
Then type in 'regedit'
Go to HKEY_LOCAL_MACHINE, then SYSTEM, then CurrentControlSet, then windows
From here on in click "CSDVersion" and click modify, change "0x00000200" (SP2) to "0x00000300" by typing 300 in the field where 200 once was.
Close it down,
Restart (MAKE SURE YOU RESTART)
And bam, your on your way to play GTA, I recommend with your graphics card to put all graphics down. The game will still be wicked looking.
Keep in mind that GTA4 is buggy as shit, it keeps freezing, even on better graphics cards, so keep your drivers updated.
* OS: Windows XP SP2 (SP3 not SP2)
* Processor: Dual core processor (Intel Pentium D or better)
* RAM: 2GB
* Hard Drive: 18GB free hard disk space
* Video Card: 512MB Direct3D 10 compatible video card or Direct3D 9 card compatible with Shader
* Drive: DVD-ROM dual-layer drive
and it will work on your 8500GT just upgrade to SP3